On Thursday, Synovus Financial (NYSE:SNV) shares received a reiterated Buy rating from Truist Securities, with a steady price target of $52.00. Following the company's third-quarter earnings report, the firm highlighted Synovus Financial's performance that exceeded expectations.
Synovus reported a third-quarter earnings per share (EPS) of $1.18 and a core EPS of $1.23, surpassing both the analyst's and the Street's estimates by 15.1% and 13.3%, respectively.
The company's adjusted pre-provision net revenue (PPNR) of $262 million was above forecasts by 5% from Truist Securities and 2% from the Street, primarily due to a higher core fee income and lower core expenses. Net interest income (NII) matched predictions at $442 million, with a net interest margin (NIM) expansion of 2 basis points to 3.22%.
Loan balances at Synovus remained relatively unchanged during the quarter, as did non-interest bearing demand deposit accounts (DDAs). However, the total cost of deposit increased by 4 basis points quarter over quarter.
Credit quality showed improvement with a lower provisioning of $23.4 million, compared to the anticipated $39.7 million and $39.1 million by Truist Securities and the Street, respectively. Net charge-offs (NCOs) decreased to 25 basis points, defying the estimate of 35 basis points, although non-performing assets (NPAs) saw a 22% increase quarter over quarter.
The Common Equity Tier 1 (CET1) ratio for Synovus Financial improved to 10.65%, which is above the management's operating range of 10.0%-10.5%. Moreover, the company executed $100 million in share repurchases during the quarter.
The updated guidance suggests a fourth-quarter PPNR of approximately $260 million, which is 5% above the current consensus. This is driven by an expected sequential increase in NII to about $446 million, compared to the Street's prediction of $437 million, and a stable NIM assumption despite 50 basis points of Federal Reserve cuts.
Truist Securities concluded that Synovus shares are likely to outperform on Friday, given the better-than-expected credit quality trends and the solid core PPNR beat.
In other recent news, Synovus Financial has reported significant developments in its financial performance. The company's operating earnings per share (EPS) of $1.23 surpassed the consensus estimate of $1.08, as reported by Stephens and Citi, with both firms maintaining their respective price targets for Synovus at $46 and $53.
The company's net interest income (NII) and core fees also exceeded expectations, contributing to a robust core revenue. Synovus has also reported a net loss of $0.16 per share in the second quarter of 2024, mainly due to a significant loss from securities repositioning.
Despite this, Synovus' adjusted earnings per share rose to $1.16, and the company declared quarterly dividends for its common and preferred stocks. The company's fourth quarter 2024 core revenue guidance of $560 million to $575 million suggests potential upside, as consensus estimates are at the lower end of this range.
Several firms, including Keefe, Bruyette & Woods, DA Davidson, Piper Sandler, RBC Capital Markets, and Stephens, revised their financial outlook for Synovus based on these recent developments. These revisions were mainly influenced by factors such as improved revenue, asset quality, and strategic gains from the company's recent securities repositioning.
InvestingPro Insights
Synovus Financial's recent performance aligns with several key metrics and trends highlighted by InvestingPro. The company's significant return over the last week, with a 9.98% price total return, reflects the market's positive reaction to its strong third-quarter earnings. This performance is part of a broader trend, as InvestingPro data shows an impressive 80.67% price total return over the past year.
The company's ability to maintain dividend payments for 51 consecutive years, as noted in an InvestingPro Tip, underscores its financial stability and commitment to shareholder returns. This is particularly relevant given the current dividend yield of 3.14%, which may attract income-focused investors.
While Synovus has shown strong recent performance, it's worth noting that 5 analysts have revised their earnings downwards for the upcoming period, according to an InvestingPro Tip. This could suggest some caution regarding future expectations, despite the company's recent outperformance.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 8 more tips available for Synovus Financial. These additional insights could provide valuable context for understanding the company's financial health and future prospects.
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